E.P.B. Electric Customers on the Variable Price Rate- We predict the POSSIBILITY for November's peak electric demand to occur on Wednesday, November 14th between 7am & 1pm. This is only a prediction based upon our best guess as to what the combination of all customers in Glasgow will demand from T.V.A. A peak demand hour can occur during any of the maximum of 24 hours of each month during one of our predicted peaks. This is our forecast which is provided as a convenience for E.P.B. customers who wish to receive forecasts. If you want to move to a fixed energy rate without coincident peak demand charges, please contact us at 270-651-8341.

Ø Reorganization of team, due to retirements and illness, will continue through 2019

Ø Review and revision of retail rates, based upon agreement with Advisory Council and EPB action in September, being considered by TVA

Action Items

📷

November 1 FCA

Ø The November 2018 TVA FCA is going to increase to 1.920 cents per kWh.

Ø On November 1, the energy component of our retail rates will adjust to reflect this increase to the wholesale cost of energy.

Audit Report on FY 2018

Ø Lanny White, from Carr, Riggs & Ingram, will deliver the annual report on findings by the team of auditors who examined all EPB finances and methods of operating the business.

Ø Copies of the report will be shared with the City of Glasgow, and I will appear before City Council on November 12 to discuss the audit and other 2018 activities of Glasgow EPB.

Deferred Compensation Plan Updates

Ø EPB adopted the original 457 – Deferred Compensation Plan in 1987 and the plan has not been materially updated since then.

Ø The plan allows employees who choose to participate, to defer wages into the plan without paying taxes on that amount, until such time as withdrawals are made from the account.

Ø The plan is fully funded by the employees who choose to participate. EPB has never made matching contributions to the 457 plan.

Ø Antiquated terms regarding investments, and the need for a clear way for succession of the Administrator and Trustee, makes up the bulk of the recommended changes to the plan.

Ø Copies of the proposed amendments are provided.

Rate Design Discussion for FY 2019

Ø Per Advisory Council’s agreement, and as a result of board directions, the rate plan approved by you last month has been submitted to TVA for their regulatory review of all six rate tariffs.

Ø TVA is evaluating our request, and tracking our financials since 2011, when we last had a retail rate increase.

Ø TVA hopes to give us an answer by early November, such that I can report to City Council at their meeting on November 12. Should they not meet this goal, our rate change will have to be delayed until January 1, 2019.

- $76,777 has been used for missed peaks during the last year, leaving a balance to carry forward into year two of $30,345, which will carry until end of term

Ø EPB Team Staffing Master Plan

- Report on progress of long-term staffing plan

- Recommendations from Reed Public Relations will be available for review

- Updated chart on Master Plan will be presented

Ø TVA Regulatory Review of EPB

- TVA performs regular audits of each Local Power Company (LPC) to determine compliance with terms of the TVA Act and the power contract between each LPC and TVA. Glasgow’s audit was performed earlier this year

- The results of the audit report are attached. You will note that it is a 100% clean audit. The TVA field auditors found Glasgow EPB in complete compliance with the Act and with the power contract.

Ø Glasgow EPB In Lieu of Tax Payments to Local Government Agencies

- Although Glasgow EPB is a non-profit municipal corporation, it also makes payments in lieu of taxes to City of Glasgow, Barren Fiscal Court, Barren County Schools, Glasgow Independent Schools, Mary Wood Weldon Library, and now, the Ambulance Service

- Over the last five years, while our competitors got a free pass from making these payments, Glasgow EPB has paid these agencies over $1.8 million

- This year alone, Glasgow EPB is writing $390,000 in checks to local governments and schools

- There is a difference between Glasgow EPB and other area utilities!

Ø Large Outage Report

- We had an outage on the afternoon of October 15 that affected 550 customers fed from our Dana Substation. This was caused by a tree falling. The duration was about 30 minutes.

- We had another outage on October 17, initially affecting LSC Communications (formerly RR Donnelley) at 7:10 am. This outage was complicated to correct because it involved a fire within the switchgear owned by LSC. At one point, the outage grew to over 4,000 customers as different segments of our transmission lines were impacted. All customers were returned to service by 9:15 am, and the larger outage time was only 10 minutes. This event will be explained in detail at the meeting.

E.P.B. Electric Customers on the Variable Price Rate- We predict the POSSIBILITY for October's peak electric demand to occur on Monday, October 8th between 12pm & 6pm. This is only a prediction based upon our best guess as to what the combination of all customers in Glasgow will demand from T.V.A. A peak demand hour can occur during any of the maximum of 24 hours of each month during one of our predicted peaks. This is our forecast which is provided as a convenience for E.P.B. customers who wish to receive forecasts. If you want to move to a fixed energy rate without coincident peak demand charges, please contact us at 270-651-8341.

E.P.B. Electric Customers on the Variable Price Rate- We predict the POSSIBILITY for October's peak electric demand to occur on Friday, October 5th between 12pm & 6pm. This is only a prediction based upon our best guess as to what the combination of all customers in Glasgow will demand from T.V.A. A peak demand hour can occur during any of the maximum of 24 hours of each month during one of our predicted peaks. This is our forecast which is provided as a convenience for E.P.B. customers who wish to receive forecasts. If you want to move to a fixed energy rate without coincident peak demand charges, please contact us at 270-651-8341

E.P.B. Electric
Customers on the Variable Price Rate- We predict the POSSIBILITY for October's
peak electric demand to occur on Thursday, October 4th between 12pm & 6pm.
This is only a prediction based upon our best guess as to what the combination
of all customers in Glasgow will demand from T.V.A. A peak demand hour can occur
during any of the maximum of 24 hours of each month during one of our predicted
peaks. This is our forecast which is provided as a convenience for E.P.B.
customers who wish to receive forecasts. If you want to move to a fixed energy
rate without coincident peak demand charges, please contact us at
270-651-8341.

E.P.B. Electric
Customers on the Variable Price Rate- We predict the POSSIBILITY for October's
peak electric demand to occur on Wednesday, October 3rd between 12pm & 6pm.
This is only a prediction based upon our best guess as to what the combination
of all customers in Glasgow will demand from T.V.A. A peak demand hour can occur
during any of the maximum of 24 hours of each month during one of our predicted
peaks. This is our forecast which is provided as a convenience for E.P.B.
customers who wish to receive forecasts. If you want to move to a fixed energy
rate without coincident peak demand charges, please contact us at
270-651-8341.

September has been another calm month
for the EPB team. The weather has been quite normal and non-violent. As this is
written, we’ve only had to issue a peak demand prediction on two days, and those
predictions were accurate, so we are looking good for September relative to
peak predictions. We hope this will continue through the balance of the month.

The task of making decisions about
reorganizing the team in the face of numerous retirements continues. So far,
the folks we have given new responsibilities as a result of these changes, are
doing a great job and making big improvements. I am optimistic that this result
will continue, but that is not to say that we are not missing the team members
who have left. We’ve got several more departures coming in the next few months,
so this project will continue through 2019.

The big agenda item this month continues
to be our retail rates, and how we need to change them to reflect our real
costs. Our agreement with the Advisory Council last year dictates an annual
review of our rate effectiveness, and that task is ongoing. The matter reaches
peak complexity this month as we will discuss the upcoming TVA wholesale rate
change, and how we need to accommodate that along with the other changes we
face. As has been the case lately, the meeting might be a bit long.

October 1
FCA

As we move toward the completion of the third
year of our retail rate re-designs, October 1 will bring us an increase in overall
power cost due to an increase in the FCA. The FCA calculation always trails
actual TVA fuel expenditures by a couple of months, so October will see us getting
an increase, due to the temperatures being higher than predictions, and due to
the greater than anticipated power purchases from neighbors during August. The October
2018 FCA is going to increase, to 1.836 cents per kWh. As usual, I am attaching
the narrative on the FCA from the TVA portal. On October 1, the energy
component of our retail rates will be adjusted to reflect this increase to the
wholesale cost of energy.

Old City
Dump Property

A decade ago, when we were looking for a site for our second TVA delivery
point, we thought the site of the old city dump would be perfect. The City
agreed and transferred the property to us.We then engaged an engineering firm to do an analysis of the site. The
analysis uncovered environmental issues that were far worse than we
anticipated, so we built East Glasgow Primary Substation nearby, on a piece of
property we acquired from a private owner.

Though we ultimately didn’t use the property, we still wound up owning
it, and all of the issues attendant thereto. We really haven’t done anything
with, or even really thought about the property for many years, until we got a
call about it a couple of weeks ago. It seems that the Commonwealth has engaged
an engineering firm to study old trash dump properties like this because there
are monies available to clean up some of these sites. The engineering firm is
tasked with considering the many properties and making recommendations to the
Commonwealth regarding which sites might best make use of the available funds.
We certainly want to cooperate with this effort, because if we can get the site
remediated with grant funds, we might well find a use for the site in the
future.

Attached to this narrative is a copy of an agreement which would simply
grant access to the site for the engineering firm to study it. We have already
given them copies of the site environmental analysis we had done a decade ago,
and, in the interest of time, I have already executed the access agreement. At
the meeting I will ask you to ratify my previous execution of the agreement.

Default TVA Approved
Retail Rates for October 1

As if this whole retail rate matter were not complex enough, and since
TVA’s wholesale rate change for October 1 does not align with our time line for
recommending a change to our retail rates, we need to implement TVA stipulated
retail rates to accommodate only the TVA wholesale change, this month. The
changes to our tariffs are very minor, only enough to cover the TVA 1.5%
increase and a couple of other procedural changes, but you need to officially approve
them, so we can get the billing system ready for October 1.

I am sorry this is so complex, but TVA is in charge of this, and they
will also be in charge of considering the combined retail rates that we are
likely to propose after your consideration of them later in the meeting. This
extra step is really just the result of TVA’s implementation of their wholesale
rate changes a couple of months before they can address our proposed local changes
to retail rates. I am attaching the tariff sheets proposed for October 1 to
this narrative. I don’t want to clog up the meeting PowerPoint presentation
with another set of tariffs for you to review.

I will not go over all of the rate design slides, unless
you want me to do so, but we will spend time discussing the variables that are
being solved relative to the equation for our needed retail rate change for
later this year. I also look forward to hashing out the issues relative to
volumetric rates and the remaining volumetric components of our retail rate
offerings. We decided in 2015 that EPB must move completely away from
volumetric rates, due to steadily declining sales and the inherent unfairness
in the way volumetric rates fail to accurately charge all customers in direct
proportion to the costs generated by all customers. We’ve suffered some
setbacks in the goal of becoming totally non-volumetric, but the risk of
continuing to have a volumetric component to our rates is still there. At the meeting, if you
choose to examine them, we will have updated examples of how our present rates,
which include a volumetric element, can fail to properly collect revenue to
cover fixed costs appropriately for the varying levels of energy consumption
within each rate class.

Remember, TVA has
informed us that the crush of LPCs who will also be making changes to their
retail rates, has eclipsed their capability to consider them for October 1
implementation, so our change will likely need to fall toward the end of the
year. We’ll just have to see how the design and approval process goes after
this month’s meeting. After this year, we will need to conduct this review
annually in July and August, such that we get into a pattern of any potential retail
rate adjustments each October, in line with the TVA wholesale adjustments.

I look forward to
discussing this complex matter with you at the meeting.

Reports

CPD Charge Reserve Fund
Status. Last year, when we agreed to limit peak prediction
days to four per month, while stipulating that customers will only pay for
their demand which is coincident with the highest system peak hour during one
of our predicted hours, we were forced to establish a kW demand markup over the
TVA wholesale cost, to accumulate funds to use when TVA bills us for a peak
which is higher than one we are billing our customers. We knew we would make
some mistakes and miss some peak hours, and that has come to pass.

For most of the last year, the projected cost of mistakes, and the actual
cost of mistakes, have aligned well, but we got a bit behind by missing the
June and July peak hours by a considerable margin. We also narrowly missed
August’s peak as well. From October 2017 through August 2018, we have collected
$96,599 to fund that account. Missed peak predictions have cost us $76,777
during that period, so we have a positive fund balance of about $19,821 at the
end of August. June and July cost us a lot of what we had accumulated, but the
very narrow miss in August, combined with high demand for the month, puts us in
good position to end the year very close to where we had projected. Hooray for
mathematics! I will keep you posted regularly as this fund moves toward a full
year of experience.

EPB Team Staffing
Master Plan. I want to review the situation with
retirements/resignations and our long-term staffing plan with you. We talked
about this some last month, and I thought you might want to hear what progress
we have made since then. One very interesting development is a set of
recommendations from Reed Public Relations, a firm we have engaged to advise us
on brand management and marketing initiatives, as a part of my consideration of
how to replace the departing Shelia Hogue, who has been the lynch-pin of our
administrative and marketing work for the last several years. I’ll have an
updated chart at the meeting and we can discuss this.